IMAX facing problems in China, and at home

Back in July 2013 giant screen operator IMAX said it expected China to be a strong market for its new screens. It had just announced a j-v in China with cinema exhibitor Wanda, and IMAX CEO Richard Gelfond said that China was a market “with tremendous growth”.

Now, seemingly its Chinese relationship is souring. The Chinese government-controlled China Film Group is opening plenty of IMAX-style giant screens, but IMAX believes the Chinese have “utilised” its technology. Various reports say that IMAX is pursuing the Chinese through the courts for “blatantly stealing” its methodology and IP.

Recent movies such as Gravity, and the upcoming RoboCop, will greatly help IMAX’s revenues outside China but IMAX now seemingly joins the long list of Hollywood players which have argued that the Chinese have challenged their agreed release dates, ignored censorship restrictions and been late in paying for their output.

The problems are said to risk stunting IMAX’s growth potential in China. One authoritative report in the New York Times suggests that the Chinese might even launch their technology globally as a direct rival to IMAX.

IMAX’s various court actions (in Canada, Hong Kong, the USA and China) cites Gary Tsui, a former IMAX software engineer who worked for 10 years at the company’s Canadian HQ, and who is alleged to have misappropriated the core technology. Tsui states he is being made a scapegoat and has done nothing wrong. An Ontario, Canada, court saw IMAX granted an injunction ordering Tsui to cease and desist, and later ordered that Tsui be detained.

IMAX say only that they are working towards a settlement with the Chinese.

IMAX might have other threats closer to home, as it seems the flow of 3D movies might also be slowing. Last year there were 34 films made – or adapted – in 3D. This year Hollywood expects to release just 28 movies in 3D, which would be the lowest percentage of total releases for the past 7 years. In 2011 there were 39 3D releases. Analysts at Morgan Stanley suggest that audience’s enthusiasm for 3D is cooling.

This directly affects IMAX’s revenue. “Consumers’ average outlay per admission in Q1 will rise just 0.5 per cent as price increases of about 2.5 per cent are offset by lower sales of the premium priced tickets for 3D movies,” says the bank.